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Buy to let returns ‘to fall by 62% in a year’

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Buy-to-let returns will drop by up to 62 per cent in the next year, according to a report.

Today, buy to let returns are around 9%. However, LSL Property Services forecasts that total buy to let returns (taking into account both rental income and capital growth) will fall to around 3.4 per cent by April 2016 – a four year low-point. This return does not include mortgage, maintenance and tax liabilities – raising the prospect of the buy to let market no longer being profitable for many investors.

The firm, which owns 500 estate agent outlets under brands including Your Move, Reeds Rains and Marsh & Parsons, based its projections on price and rental data on over 20,000 properties on its books.

The average landlord in England and Wales has seen a return of £15,503 over the last 12 months. Within this figure rental income makes up £8,247 while the average capital gain amounts to £7,256.  In a year’s time, while rental income will have risen to £9,292, negative capital growth of £3,036 will result in average total returns falling to £6,256, the report said.

Adrian Gill, director of LSL Properties, said: “Rents are going skywards and still accelerating. That momentum is fueled by a fundamental shortage of housing and given oxygen by renewed wage growth,” said

“Looking ahead is particularly difficult this month, but potentially less upbeat. If current trends continue, then over the next 12 months, ending April 2016, the average landlord would see a total return of 3.4 per cent, if price trends continue as has been seen over the last three months.”


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